Hong Kong prop­erty slump wor­ries in­vestors

The Pak Banker - - BUSINESS -

HONG KONG: In a city that saw de­mand pro­pel prop­erty prices to a record last year, the es­ti­mate that trans­ac­tions reached a 25 year-low in Hong Kong shows how quickly sen­ti­ment has turned. Home prices have slumped al­most 10 per­cent since Septem­ber and monthly sales in Jan­uary fell to the low­est since at least 1991, ac­cord­ing to Cen­taline Prop­erty Agency Ltd. Amid a spike in flex­i­ble mort­gage rates this month and ane­mic de­mand for new de­vel­op­ments, the low trans­ac­tions vol­ume for Jan­uary is the lat­est ev­i­dence that prices have fur­ther to fall. "The dan­ger is that when sen­ti­ment turns neg­a­tive, it's very hard to turn things around," Michael Spencer, Deutsche Bank AG's Hong Kong-based Asian chief econ­o­mist, said in a tele­phone in­ter­view. "De­vel­op­ers re­al­ize they missed the best op­por­tu­nity to sell." Hong Kong's prop­erty mar­ket has been show­ing signs of weak­en­ing amid a ris­ing sup­ply of homes, higher short-term in­ter­est rates and slow­ing growth in China. De­vel­op­ers have been slow to make out­right price cuts to move real es­tate while would-be buy­ers are de­lay­ing pur­chases in an­tic­i­pa­tion of fur­ther price de­clines, cre­at­ing a stand­off that could put more pres­sure on prices and drag down the city's econ­omy. Fall­ing prop­erty prices may cre­ate a neg­a­tive wealth ef­fect on con­sump­tion by prompt­ing buy­ers to cut back on their pur­chases, Deutsche Bank's Spencer said. That could deal a huge blow to an al­ready vul­ner­a­ble econ­omy where half the pop­u­la­tion owns homes and con­sump­tion ac­counts for nearly two-thirds of gross do­mes­tic prod­uct.

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